A bond with a face value of Rs. 1,000 pays annual interest of Rs. 80 and currently sells for Rs. 800. What is its approximate current yield?
Correct answer: C. 10%
- A. 6%
- B. 8%
- C. 10%
- D. 12%
Explanation
Current yield is calculated as annual interest divided by the bond's current market price. Thus, Rs. 80 divided by Rs. 800 equals 10%; this is not the bond's yield to maturity.
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